Fitch Ratings has assigned a 'BBB' rating to the $400 million perpetual preferred securities issuance of AXIS Capital Holdings, Ltd. (AXIS Capital). Fitch also affirmed AXIS Capital's 'A' Issuer Default Rating and the 'A+' Insurer Financial Strength ratings of AXIS Capital's operating subsidiaries. The Rating Outlook is Stable. A full rating list is shown below.

AXIS Capital is issuing $400 million in Series C perpetual, non-cumulative preferred shares with a dividend of 6.875%. The proceeds will be used to repurchase the full $250 million of Series B 7.5% perpetual, non-cumulative preferred shares and a portion of the $250 million Series A 7.25% perpetual, non-cumulative preferred shares. Consequently, financial leverage ratios are not expected to change and preferred securities will total $500 million or approximately 9% of total shareholders' equity.

AXIS Capital's debt-to-total capital, excluding unrealized gains on fixed income securities, was 16% at year-end 2011. All classes of AXIS Capital's preferred securities are treated as equity in financial leverage calculations. AXIS Capital's Total Financing and Commitments (TFC) ratio, which includes its preferred securities, was considered appropriate for the current rating category at less than 0.4 times (x). TFC is a comprehensive measure of debt-related leverage, and is intended to flag those companies that have an above-average reliance on the capital markets for funding.

The ratings continue to reflect AXIS Capital's conservatively structured balance sheet, history of favorable reserve development and benefits from premium diversification across business lines. Balanced against these strengths was a poor operating performance during 2011 due to heavy catastrophe losses.

Consolidated net income was $9 million in 2011, down significantly from $820 million in 2010. AXIS Capital posted a combined ratio of 112.3% for 2011, up nearly 24 percentage points from 2010. Pretax catastrophe losses reached $931 million, but do not appear to be out of proportion with its market share or peers.

AXIS Capital has successfully grown its stockholders' equity in its initial decade of operation, and operating leverage of 0.6x at year-end 2011 is conservative relative to peers. AXIS Capital manages its exposure to catastrophic events to a maximum of 25% of stockholders' equity in a 1-in-250-year event.

Favorable reserve development continues to contribute to earnings, amounting to $257 million or 7.8 percentage points during 2011. Maintaining a high level of favorable development will be a challenge given the recent period of soft market conditions faced by both primary insurers and reinsurers.

AXIS Capital's diverse premium base enables it to compete effectively under a variety of market conditions as seen during a difficult 2011 and reduces its exposure to any one segment of the market. The company's net written premium during 2011 was split between primary lines 43% and reinsurance 57%. Geographically the premium base is spread across the U.S., Bermuda and Europe.

Key rating triggers that could lead to a downgrade include:

--Losses from a major catastrophic event that are worse than expectations or when compared with industry and peer company losses. Further, an inability to raise capital following a loss event would be viewed negatively;

--An unfavorable trend that caused Fitch to question AXIS Capital's better-than-peer underwriting results.

--A permanent increase in leverage measured by debt-to-total capital in excess of 25% or net written premiums-to-stockholders' equity greater than 1x;

--Reserve deficiencies indicating poor reserving practices.

Key rating triggers that could lead to an upgrade include:

--Improved market position measured by continued strong consistent organic capital formation and double-digit returns on equity with lower volatility than peers over an extended period of time. Fitch considers a rating upgrade to be unlikely in the near term given AXIS Capital's business profile and challenges in the current market rate environment.

Fitch has assigned the following rating:

AXIS Capital Holdings, Ltd.--Series C 6.875% preferred securities rating of 'BBB'.

Fitch has affirmed the following ratings:

AXIS Capital Holdings, Ltd.--Issuer Default Rating at 'A';--5.75% Senior Debt Rating at 'A-';--Series A 7.25% preferred securities rating at 'BBB';--Series B 7.50% preferred securities rating at 'BBB'.

AXIS Specialty Finance LLC--5.875% senior debt rating at 'A-'.

AXIS Specialty Limited (Bermuda)AXIS Reinsurance CompanyAXIS Insurance CompanyAXIS Surplus Insurance CompanyAXIS Specialty Insurance Company--Insurer Financial Strength ratings at 'A+'.

Additional information is available at www.fitchratings.com. The issuer did not participate in the rating process other than through the medium of its public disclosure. The ratings above were unsolicited and have been provided by Fitch as a service to investors.

Applicable Criteria and Related Research:--'Insurance Rating Methodology' (Sept. 22, 2011).

Applicable Criteria and Related Research:Insurance Rating Methodologyhttp://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=651018

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